Mitsubishi Corporation and Mitsubishi Heavy Industries have taken a 38.4 per cent stake in Metito Holdings in a move enabling the Dubai-based utility business to accelerate its expansion in emerging markets.
Gulf Capital, which had been Metito’s majority owner, will sell 32 per cent of the company, leaving it with a 23.8 per cent stake.
The rest of the shares being sold will come from the company’s founding Ghandour family and the International Finance Corporation (IFC). The family will remain Metito’s second largest shareholder at 35 per cent.
Karim El Solh, the chief executive and managing partner of private equity at Gulf Capital and serving chairman of Metito, said the deal with the Japanese group “serves as a template for future regional investments into family owned businesses in the Middle East”.
The Japanese government-owned Japan Bank for International Cooperation (JBIC), which provides finance to domestic companies, will subscribe to the deal as a preference shareholder, providing Metito with funds of up to US$92 million.
For Gulf Capital, an Abu Dhabi-based private equity company that acquired its stake in Metito in 2006, the deal represents a second successful divestment in recent months. In March it generated gains of more than $600m after another of the companies in its portfolio, Gulf Marine Services, completed an IPO on the London Stock Exchange.
While the value of yesterday’s transaction was not disclosed, the sale netted Gulf Capital more than its targeted return of three times its investment.
“Metito is already well poised to tap into projects of various scales, and this partnership, in addition to the investment by JBIC, will expedite the company’s growth through creating new opportunities and allowing us to become more competitive globally,” said Mutaz Ghandour, the chief executive of Metito.
Since launching in 1958, Metito has established itself as the largest Middle East-based privately owned water group, with a focus on developing markets. The equity provided by JBIC will allow Metito to fast-track projects in the UAE, China and Egypt. It will also help it to propel its growth deeper into Asia, as well as Africa, including Ghana and Rwanda, said Mr Ghandour.
Metito will also benefit from the research and development expertise afforded by its partnership with the two Mitsubishi units, which both are part of the powerful Mitsubishi Group. Mitsubishi Corporation is Japan’s largest trading company and operates an energy business division. Mitsubish Heavy Industries has interests in power generation and nuclear power. The two companies invested in Metito through an investment vehicle, owned 60 per cent by Mitsubishi Corporation and 40 per cent by Mitsubishi Heavy Industries.
“The numerous mutual benefits stemming from this deal will ensure world-class water solutions are brought to new markets, benefiting more people in a stronger and sustainable manner,” said Masaji Santo, a senior vice president and division chief operating officer at Mitsubishi Corporation.
Operating in a capital-intensive industry, Metito had previously tapped loans from other government and multilateral lenders. In June last year, it obtained a $20m loan from the German development finance institution DEG – Deutsche Investitions und Entwicklungsgesellschaft – under an agreement signed with the IFC, a World Bank unit which holds a 3 per cent stake in Metito. The deal also involved $50m in loans from the IFC.
Metito had previously considered an initial public offering as a way of generating cash. Mr Ghandour said the latest deal “does not rule out” an eventual IPO.
“The current finance will last a certain period of time and once that is invested we will examine other options,” he said.
tarnold@thenational.ae
Follow us on Twitter @Ind_Insights
